My Lords, the Bill will strengthen the concurrency regime. I have already noted that the CMA will have stronger powers to co-ordinate Competition Act enforcement work and sector regulators will have explicit duties to consider using the Competition Act before taking regulatory enforcement action. We also expect that the CMA will work in close co-operation with the sector regulators in applying their concurrent powers.
Consistent with this approach, the Government also want to send a further signal about the need for strong and effective use of competition powers across the regulated sectors. They have proposed that, if the new concurrency arrangements do not work and if a regulator, other than Monitor, which the Government have excluded from the scope of the power, fails to produce better outcomes, the Secretary of State will have a power to ensure that the OFT and then the CMA take sole responsibility for applying concurrent competition powers in that regulated sector.
There was a debate in Grand Committee about providing a more explicit focus on co-operation between the CMA and regulators, and ensuring that the power is not used without early warning to the regulator. We have considered these points carefully and have therefore proposed Amendments 62, 63, 65, 66, 67, 68 and 70. These amendments require that regulators, the CMA and relevant devolved Administrations be consulted on the potential use of the power prior to the launch of a more public consultation on a proposal to use it. This ensures that there will be early discussions with regulators on any concerns giving rise to a proposed use of the power and allows them an opportunity to respond.
The amendments will also set out a purpose for the power: the promotion of competition within any market or markets in the United Kingdom for the benefit of consumers. This prevents the use of the power for any purpose other than improving the competition regime and ensures the focus of the competition regime remains benefitting consumers.
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Within this group are some technical amendments. Government Amendment 52 also touches on the sector regulators. It makes a consequential change to the Civil Aviation Act 2012 to refer to the CMA instead of the Competition Commission. Government Amendment 89 is a minor and technical amendment on the commencement of the reserve power, and Amendment 90 is a further minor and technical amendment on commencement.
I will now make a few points about the amendments tabled by the noble Lord, Lord Whitty, on the sector regulators. Amendment 46 would include the Financial Conduct Authority within the scope of the CMA’s concurrency report. After lengthy debate on the Financial Services Bill, Parliament decided that the FCA should have a competition remit and mandate to use its powers to promote competition, but it will not have concurrent competition powers under the Competition Act or the Enterprise Act. Instead, there are special arrangements to enable the FCA to pass issues to the CMA and for the CMA to be able to scrutinise the competition effects of the financial services regulators’ actions.
As it will not have concurrent competition powers, it would not make sense to include the FCA within the scope of the CMA’s specific report on concurrency as this would do nothing to improve transparency or accountability. We fully expect, however, that the CMA and the FCA will have a memorandum of understanding on how they work together and may well report on how they have worked together to improve competition in financial services.
Amendments 64 and 69 relate to the power to remove concurrent powers. I am pleased to see that the noble Lord agrees that such a power should exist, but I cannot agree with the form of the power he proposes. He proposes a general provision that the CMA and sector regulators work together on the basis of co-operation. The CMA, however, will have powers to carry out market investigations in the regulated sectors and can act as a second pair of eyes to the conclusions of a regulator. It will also determine regulatory appeals and references from the decisions of regulators. It therefore needs to be free to disagree with their conclusions and, as such, it would be inappropriate for it to be generally required to co-operate with them. In any case, the Bill and existing legislation already include a number of provisions on co-ordination of the CMA’s and the regulators’ functions and the OFT has a memorandum of understanding with a number of regulators.
The amendments proposed by the noble Lord, Lord Whitty, also link the use of the power to the CMA’s report on concurrency. This report, however, will be limited in scope. It ensures there is transparency around the use of concurrent powers and requires the
CMA to provide an assessment of how the concurrency arrangements have operated. While the CMA’s concurrency reports may therefore provide some relevant analysis, they are not intended to provide a full assessment of sector regulators’ performance or of whether the distribution of powers across the CMA and the regulators remains appropriate. It is therefore not right to link the use by the Secretary of State of the power to remove concurrency to this report.
Finally, these amendments would include the FCA within the list of regulators whose concurrent powers could be withdrawn by the Secretary of State. As the FCA does not have concurrent competition powers under the Competition Act and the Enterprise Act, it would not make sense to include it within the scope of the Secretary of State’s powers.
The noble Lord, Lord Whitty, raised an issue concerning the Financial Services Act 2012 introducing a new competition scrutiny regime for financial services. The Financial Conduct Authority and the CMA will have an important role to play in promoting effective competition in financial services. The FCA needs a mechanism to engage the CMA if it is to make sure that the CMA’s powers and expertise are effectively brought to bear in the financial services sector. The FCA will therefore have the power of referral to the CMA with the OFT, and then the CMA when it becomes fully operational, under a corresponding duty to respond within 90 days. The availability of the power will not prevent the FCA taking the lead in addressing competition issues where it is better placed to do so. When it receives a referral from the FCA, the CMA may have the information and analysis it needs to take action almost immediately, for example, launching a market investigation reference or bringing Competition Act enforcement proceedings.
The noble Lord, Lord Whitty, raised an issue concerning the OFT/CMA powers under the Financial Services Act. The scrutiny regime exists now for the Financial Services Authority, but this regime is now duplicative and inconsistent with how scrutiny works in other sectors. Therefore, under the Financial Services Act there will be a first tier of scrutiny under the CMA’s powers to conduct market studies which may consider the impact of regulation on the market. The OFT and the CMA will be able to rely on existing powers to give advice to the regulators.
I hope I have gone some way to answering the questions raised by the noble Lord, Lord Whitty, and I ask him to withdraw Amendment 46.